Tuesday, June 19, 2007

The lead in Chinese toys is an example of how unregulated markets provide many socially undesirable outcomes. Can you imagine what might be in products if there were no safety and labeling laws?

In the June 19, 2007 New York Times article "As More Toys Are Recalled, Trail Ends in China," Eric S. Lipton and David Barboza report there are cries for increased government oversight to prevent the recurrence of events such as this.

WASHINGTON, June 18 — China manufactured every one of the 24 kinds of toys recalled for safety reasons in the United States so far this year, including the enormously popular Thomas & Friends wooden train sets, a record that is causing alarm among consumer advocates, parents and regulators.

The latest recall, announced last week, involves 1.5 million Thomas & Friends trains and rail components — about 4 percent of all those sold in the United States over the last two years by RC2 Corporation of Oak Brook, Ill. The toys were coated at a factory in China with lead paint, which can damage brain cells, especially in children.

Just in the last month, a ghoulish fake eyeball toy made in China was recalled after it was found to be filled with kerosene. Sets of toy drums and a toy bear were also recalled because of lead paint, and an infant wrist rattle was recalled because of a choking hazard.

Over all, the number of products made in China that are being recalled in the United States by the federal Consumer Product Safety Commission has doubled in the last five years, driving the total number of recalls in the country to 467 last year, an annual record.

It also means that China today is responsible for about 60 percent of all product recalls, compared with 36 percent in 2000.

Much of the rise in China’s ranking on the recall list has to do with its corresponding surge as the world’s toy chest: toys made in China make up 70 to 80 percent of the toys sold in the country, according to the Toy Industry Association.

Combined with the recent scares in the United States of Chinese-made pet food, and globally of Chinese-made pharmaceuticals and toothpaste, the string of toy recalls is inspiring new demands for stepped-up enforcement of safety by United States regulators and importers, as well as by the government and industry in China.

“These are items that children are supposed to be playing with,” said Prescott Carlson, co-founder of a Web site called the Imperfect Parent, which includes a section that tracks recalls of toys and other baby products. “It should be at a point where companies in the United States that are importing these items are held liable.”

The toy trains and railroad pieces are made directly for RC2 at plants it oversees in China, presumably giving it some control over the quality and safety of the toys made there. Staci Rubinstein, a spokeswoman for RC2, declined on Monday to comment on safety control measures at company plants in China.

The Toy Industry Association, which represents most American toy companies and importers, also declined to comment.

Julie Vallese, a spokeswoman for the Consumer Product Safety Commission, said the agency recognizes that more must be done to prevent the importation of hazardous toys and other products from China. “It is a big concern. And the agency is taking steps to try to address that as quickly as possible,” Ms. Vallese said. “Their businesses will suffer if they don’t meet safety standards.”

Scott J. Wolfson, a second Consumer Product Safety Commission spokesman, would not say how long ago RC2 discovered the problem or when it first reported it to federal authorities.

In the last two years, the staff of the consumer product commission has been cut by more than 10 percent, leaving fewer regulators to monitor the safety of the growing flood of imports.

Some consumer advocates say that such staff cuts under the Bush administration have made the commission a lax regulator. The commission, for example, acknowledged in a recent budget document that “because of resource limitations,” it was planning next year to curtail its efforts aimed at preventing children from drowning in swimming pools and bathtubs.

The toy industry in the United States is largely self-policed. The Consumer Product Safety Commission has safety standards, but it has only about 100 field investigators and compliance personnel nationwide to conduct inspections at ports, warehouses and stores of $22 billion worth of toys and tens of billions of dollars’ worth of other consumer products sold in the country each year. “They don’t have the staff that they need to try to get ahead of this problem,” said Janell Mayo Duncan, senior counsel at the Consumers Union, which publishes Consumer Reports. “They need more money and resources to do more checks.”

Most recalls are done voluntarily, as was the case with Thomas & Friends, after companies discover problems or receive complaints.

Among the toy recalls, the problem is most acute with low-price, no-brand-name toys that are often sold at dollar stores and other deep discounters, which are manufactured and sent to the United States often without the involvement of major American toy importers. Last year, China also was the source of 81 percent of the counterfeit goods seized by Customs officials at ports of entry in the United States — products that typically are not made according to the standards on the labels they are copying.

At one of the RC2 factories in Dongguan, China, on Sunday, a pair of workers who were paid about $150 a month to spray paint on mostly metal toy trains six days a week said they did not know whether the paint they used contained lead. The factory produces metal toys as well as the wooden toys listed in the Thomas recall.

“We’re just doing the painting,” says Li Hong, a 22-year-old factory worker who was sitting out in front of the factory dormitories.

Exactly who operates the factories making the Thomas & Friends trains in Dongguan is unclear. While the zone is run by a group of Chinese or Hong Kong suppliers, it also houses an office building that bears the RC2 corporate logo.

China’s own government auditing agency reported last month that 20 percent of the toys made and sold in China had safety hazards such as small parts that could be swallowed or sharp edges that could cut a child, according to a report in China Daily. Officials in China, of course, are fighting back, insisting that its food and other exports are safe and valuable, that new regulations are being put into place and that problem goods account for a tiny portion of all exports.

The Toy Industry Association urges its members to routinely test products it is importing to make sure they comply with federal safety standards, which prohibit, for example, surface paint that contains lead in toys or items that could cause a choking hazard.

Other major retailers or toy industry companies hit by recalls for products made in China this year include Easy-Bake Ovens, made by Hasbro, which could trap children’s fingers in the oven and burn them, and Target stores, which the consumer product commission said was importing and selling Anima Bamboo collection games, some of which were coated with lead paint.

The 22 models of the Thomas & Friends toys that are being recalled include some of the most popular items in the line’s collection, such as the red James engine and the fire brigade truck. The toy line, based on the children’s book and television series, has an almost fanatical following among some families, who own dozens of models, which can cost $6.50 to $70 each.

The string of lead paint cases has drawn the most attention from consumer watchdogs and parenting advice columnists.

“Do I have to look at every toy that has paint on it that comes from China as perhaps suspect?” said Mr. Carlson, of Imperfect Parent.

Ms. Duncan, of Consumers Union, urged parents to sign up for the Consumer Product Safety Commission’s automated notification system at the commission’s Web site (www.cpsc.gov), so they can stay on top of which toys are being recalled.

Ms. Vallese, the spokeswoman for the product safety commission, said the agency’s acting chairwoman, Nancy A. Nord, went to China in May for a meeting with her counterparts there, focusing in particular on toys, lighters, electronics and fireworks.

“Is there a concern that there are more products coming in from China and making sure they live up to the standards we expect?” Ms. Vallese said. “Yes, there is, and we understand our authority and obligation and we will make sure we enforce it.”

But parents shopping at for toys in New York over the weekend said the whole episode left them uneasy.

“I think it’s terrible,” said Chris Gunster, 41, while perusing the Thomas & Friends display area in Toys “R” Us at Times Square with his wife and 4-year-old son, James, a big fan of the toy trains. “Lead paint in this day and age?”

Eric S. Lipton reported from Washington and David Barboza from Dongguan, China.

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The following information is provided to help you understand the biases that may be inherent in this blog.My primary U.S. economic policy concern is the fiscal irresponsibility of government.The Baby Boom generation, which I am part of, has spent the past 30 years accumulating massive public debt that will be passed to our children, grandchildren, and subsequent generations.I am not opposed to the reduction or elimination of any government spending program.Yet, politicians tend to call for reduced spending in general terms and fail to publicly declare specific cuts they would make.The primary cause of the massive U.S. public debt is revenue reductions (in the form of tax cuts) without similar decreases in government spending.

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I am a professor of economics at Jacksonville University, where I teach courses in introductory economics, comparative economic development, and globalization. I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.